Investing November 15, 2012

Investors Seek Higher-Risk Bond Funds

November 15, 2012 (PLANSPONSOR.com) – Investors added $27.7 billion to long-term open-end funds during October, according to Morningstar.
Reported by

Taxable-bond funds led the way with inflows of $29.6 billion, while U.S.-stock funds saw outflows of $8.3 billion. Investors continue to seek out higher-risk segments of the bond market. The multisector bond, bank loan, emerging-markets bond, nontraditional bond, world bond and high-yield bond categories each saw inflows of more than $1 billion.   

PIMCO topped all firms with inflows of $8.1 billion in October, led by PIMCO Total Return Bond, which took in $2.4 billion. DoubleLine Total Return took in $1.9 billion during the month and $17.9 billion year-to-date, making it the most popular mutual fund so far this year.     

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Alternative funds have had the fastest organic growth rate of any asset class in 2012, collecting $12.4 billion in year-to-date inflows.   

To view Morningstar’s asset flows report, visit http://www.global.morningstar.com/octflows12.
Administration November 15, 2012

Pension Settlement Appeal Decreased in October

November 15, 2012 (PLANSPONSOR.com) – The Dietrich Pension Risk Transfer Index decreased from its prior month level of 81.99 and sits at 79.85 as of November 1.
Reported by

The decrease in the index was driven by lower pension funding levels, coupled with a 14 basis point reduction in annuity discount rate spreads. The annuity discount rate proxy embedded within the index dipped to 2.50%. The Index tracks the relative attractiveness of annuitizing pension liabilities.  

Despite the lower appeal in October, Verizon announced a settlement of pension obligations through Prudential (see “Verizon Signs Partial Pension Buyout Deal”).   

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Jay Dinunzio, senior consultant at Dietrich & Associates, said, “This year has been an absolute paradox in the pension settlement marketplace. While interest rates continue to move lower, driving up settlement costs, plan sponsors are accelerating execution of pension settlement decisions and accepting the trade-off of higher costs in return for the complete elimination of pension obligations. Corporate pension sponsors are becoming increasingly aware of the real economic costs of pensions and actively considering how and when to recognize those costs through a combination of purchased annuities and voluntary lump sum offers.”  

The Dietrich Pension Risk Transfer Index can be found at https://www.dietrichassociates.com. 

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